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Overriding Interests: Don’t Forget to Check!

Background:

‘Overriding Interests’ is the name given to interests in land that are not registered at Land Registry, but are still capable of binding a person acquiring land, even if they are unaware of the existence of the interest.

Overriding interests are a controversial part of land law in England and Wales, as their existence means that the register cannot be a true reflection of the land. They first appeared in the Land Registration Act 1925 and they progressed through to the current legislation, the Land Registration Act 2002 (“LRA 2002”), albeit with some limitation.

The interest of a person merely in actual occupation of land will override the first registration of the land. On a subsequent sale however, the interest will only override the disposition if the person is in actual occupation of the land, the interest is obvious on a reasonably careful inspection of the land at the time of the disposition and not within the actual knowledge of the purchaser.

Recent Case:

In the recent case of Trevallion v Watmore and another [2016] EWLandRA 2015_0295 the First Tier Tribunal (Property Chamber) (“FTT”) held that a property was acquired subject to a lease over part of the garden, despite the new buyers’ claim they were unaware of its existence.

In this case, the previous owners of the property (A) had granted a long under lease for a triangular part of their garden to the property next door (B) in 1968. This was fenced off but hidden by foliage and accessible from B.

The freehold title to the property (A) was registered in 2009 and included the leased triangular garden, the new purchasers then bought the freehold in 2013.

In December 2013 the next door property (B) attempted to register their lease of the garden with the Land Registry claiming their lease overrode the first registration and the subsequent purchase of the property (A).  The new owners objected to the application and the dispute was considered by the FTT.

The FTT had no problem in finding that the lease overrode the first registration of the property. The requirements for an interest to override a first registration were met, because B had been in actual occupation of the garden triangle since 1968, when they acquired the lease.

The FTT was satisfied the new purchasers of property A had no actual knowledge of the lease. This meant that under paragraph 2 of Schedule 3 to the LRA 2002 the lease could not override the transfer to them, and they would not be bound by it, unless property B’s interest in the garden triangle would have been obvious on a reasonably careful inspection by the new purchasers.

The new buyers had visited the property (A) on three occasions before buying it. The evidence indicated they had not checked behind foliage that concealed the fence which separated off the garden triangle. While the fence was not visible if you merely looked towards the foliage, the FTT highlighted that under the LRA 2002 an interest protected by occupation may override a disposition if it would be apparent on a "reasonably careful inspection" and that this is more than a "quick look".

The FTT found that a reasonably careful inspection would involve at least looking at the property's boundaries. Anyone checking those boundaries could have seen the fence simply by moving branches. As such, the next door’s occupation of the garden triangle could have been discovered by a reasonably careful inspection when the new purchasers acquired their property. This meant that the lease to the triangular portion of garden overrode the transfer to them and the new purchasers were bound by it.

Reflection:

The case contains no new law, however it serves as a significant reminder that leases can amount to overriding interests and will supersede first registration and any disposition of the property; binding any new owner. It demonstrates the importance of carrying out a ‘reasonable and careful inspection’, checking the boundaries of a property for unusual features and to make sure that they accord with any title plans.

 

For more information contact the Property team on 01643 707777